Flow Traders Investor Presentation 3Q 2016 results

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Flow Traders
Investor Presentation 3Q 2016 results

                                        Flow Traders |
Disclaimer
This presentation is prepared by Flow Traders N.V. and is for information purposes only and the     Forward-looking statements speak only as at the date at which they are made. Flow Traders
material contained in this document is provided ‘as is’. It is not a recommendation to engage in    expressly disclaims any obligation or undertaking to update, review or revise any forward-
investment activities and you must not rely on the                                                  looking statements contained in this presentation to reflect any change in its expectations or
                                                                                                    any change in events, conditions or circumstances on which such statements are based unless
content of this document when making any investment decisions. The information in this              required to do so by applicable law.
document does not constitute legal, tax, or investment advice and is not to be regarded as
investor marketing or marketing of any security or financial instrument, or as an                   Financial objectives are internal objectives of Flow Traders to measure its operational
                                                                                                    performance and should not be read as indicating that Flow Traders is targeting such metrics
offer to buy or sell, or as a solicitation of any offer to buy or sell, securities or financial     for any particular fiscal year.
instruments.
                                                                                                    Flow Traders’ ability to achieve these financial objectives is inherently subject to significant
The information and materials contained in this presentation are provided ‘as is’ and Flow          business, economic and competitive uncertainties and contingencies, many of which are
Traders N.V. or any of its affiliates (“Flow Traders”) do not warrant the accuracy, adequacy or     beyond Flow Traders’ control, and upon assumptions with respect to future business decisions
completeness of the information and materials and expressly disclaim liability for any errors or    that are subject to change. As a result, Flow Traders’ actual results may vary from these
omissions. This presentation is not intended to be, and shall not constitute in any way a binding   financial objectives, and those variations may be material.
or legal agreement, or impose any legal obligation on Flow Traders. All intellectual property
rights, including trademarks, are those of their respective owners. All rights reserved. All        Efficiencies are net, before tax and on a run-rate basis, i.e. taking into account the full- year
proprietary rights and interest in or connected with this publication shall vest in Flow Traders.   impact of any measure to be undertaken before the end of the period mentioned. The
No part of it may be redistributed or reproduced without the prior written permission of Flow       expected operating efficiencies and cost savings were prepared on the basis of a number of
Traders.                                                                                            assumptions, projections and estimates, many of which depend on factors that are beyond
                                                                                                    Flow Traders’ control. These assumptions, projections and estimates are inherently subject to
This presentation may include forward-looking statements, which are based on Flow Traders’          significant uncertainties and actual results may differ, perhaps materially, from those
current expectations and projections about future events, and are not                               projected. Flow Traders cannot provide any assurance that these assumptions are correct and
                                                                                                    that these projections and estimates will reflect Flow Traders’ actual results of operations.
guarantees of future performance. Forward looking statements are statements that are not
historical facts, including statements about our beliefs and expectations. Words such as “may”,     By accepting this document you agree to the terms set out above.
“will”, “would”, “should”, “expect”, “intend”, “estimate”, “anticipate”, “project”,
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these forward-looking statements. By their nature, forward-looking statements involve known
and unknown risks, uncertainties, assumptions and other factors because they relate to events
and depend on circumstances that will occur in the future whether or not outside the control
of Flow Traders. Such factors may cause actual results, performance or developments to differ
materially from those expressed or implied by such forward-looking statements. Accordingly,
no undue reliance should be placed on any forward-looking statements.

                                                                                                                                                            Flow Traders | Investor Presentation    2
An introduction

                    Founded in January 2004 with offices in Amsterdam, New York and Singapore

                    Flow Traders trades in all time zones

                    Our core business is providing liquidity for ETPs1

                    Around 100 traders providing continuous ETP liquidity on 97 trading venues worldwide

                    We are listed on Euronext in Amsterdam since 10th of July 2015 (Ticker FLOW NA)

                    Flow Traders is independent and not linked to any issuer or bank

                                                                                                                                                A leading global
                                                                                                                                                technology-
                                                                                                                                                enabled liquidity
                                                                                                                                                provider specialized
                                                                                                                                                in ETPs
1   ETPs (Exchange Traded Products) include ETFs (Exchange Traded Funds), ETCs (Exchange Traded Commodities) and ETNs (Exchange Traded Notes)
                                                                                                                                                             Flow Traders | Investor Presentation   3
Flow Traders at a glance

              AMERICAS                                                                                          EUROPE                                      ASIA
              (since 2009)                                                                                      (since 2004)                                (since 2007)

                                    ETP AuM(€bn)                                                                                      ETP AuM(€bn)                           ETP AuM(€bn)

                                    2,228                                                                                             511                                    278

                                                                                                                 FLOW ETP
               FLOW ETP Value                                                                                    Value Traded                               FLOW ETP Value
               Traded (€bn)*        FTE                                                                                               FTE                   Traded (€bn) *   FTE
                                                                                                                 (€bn) *

               129                  49                                                                           289                  226                   23               50

ETP AUM as at 30 September 2016, ETP Value Traded for the nine months period ended 30 September 2016 and FTE for the quarter ended 30 September 2016

                                                                                                                                                       Flow Traders | Investor Presentation   4
Our corporate culture supports our leading market position

      High-growth underlying market driven
      by secular shifts in the asset management
      industry

                                                                          ETP
      Critical component of the ETP Ecosystem                            Pricing
                                                                       Excellence

      Leading global technology-enabled
      ETP-focused liquidity provider
                                                                         Strong
                                                                      Team-Driven
                                                                        Culture
      Highly collaborative, integrated and resilient   Cutting-Edge
      business model with strong barriers to entry      Proprietary                            Risk management
                                                        Technology                                   Focus
                                                         Platform

      Strong growth, high margins and
      attractive dividend pay-out ratio

                                                                                    Flow Traders | Investor Presentation   5
Critical component of the ETP Ecosystem

                                              ETP creation / redemption

                                                        >25 ETP issuers                                                     Providing liquidity to
                                                                                                                            the global ETP market,
  Primary Market

                                                                                                                            fostering primary
                                                                                                                            issuance and
                                                                                                                            secondary trading
                                                  ETPs vs basket of assets / cash

                                                                                                                            Facilitating primary
                                          Ability to create and redeem daily
                                                                                                                            issuance through
                                                                                                                            Authorized Participant
                                                                                                                            (AP) agreements

                                Global risk transfer between market participants

                                                                                                                            Aggregating flow from
                                                                                                                            all market participants
  Secondary Market

                           ETPs vs cash                                                  ETPs vs cash

                           On-exchange                                    Institutional / off-exchange liquidity            Increasing secondary
                        liquidity provision                                              provision
                                                                                                                            market efficiency
                                                                                                                            through global
                     97 Exchanges and other                                  >475 Institutional Counterparties
                                                                                                                            interconnectivity and
                         Trading Venues
                                                                               Asset managers, private banks,
                                                                                                                            efficient pricing
                                                                                 insurance companies etc.

                                                                                                                   Flow Traders | Investor Presentation   6
3Q results overview

                      Flow Traders | Investor Presentation   7
Executive summary 3Q performance

     We have increased our market share in the third quarter as we grew in ETP Value Traded,
     confirming our position as leading global ETP liquidity provider

     Slow market trading activity, with VIX close to all time lows, impacted our Net Trading Income
     (NTI) and Revenue Capture

     We still see a lot of growth opportunities in the US and Asia

     We continue to invest in our people and technology to benefit from future growth and facilitate
     our growing presence

     We are on track to deliver the second best year since inception

                                                                                    Flow Traders | Investor Presentation   8
ETP market continued to grow in 3Q16

   ETP Assets under Management grew by 5.8%                                                                             Net inflows trend remains skewed towards                                                      Quarterly increase in ETP listings driven by
   quarter-on-quarter                                                                                                   Fixed Income & Equity products                                                                the Americas and APAC regions

€ bn                                                                                                                          € bn                                                                                   number

 3,500                                                                                                                        130
                                                                                                        3,016                                                                       109                 111           12,000
                                                                                                                                                          107
                                                                                        2,851
 3,000                                                 2,642             2,667                                                 110                                                                                                                                                            9,644
                                                                                                                                                                                                                      10,000                                                         9,542
                                                                                                                                                                  85                             83                                                                         9,117
                                                                                                                                                                                                                                                       8,556    8,891
 2,500                                                                                                                                                                         76                                                           8,262
                                        2,079                                                                                  90                                                                                                   8,024
                            1,918
                                                                                                                                             66                                                                           8,000
               1,744
 2,000
                                                                                                                               70                    50
                                                                                                                                                                       46                                                 6,000
 1,500
                                                                                                                               50                                                           23

 1,000                                                                                                                                  24                                                                                4,000
                                                                                                                               30
  500                                                                                                                                                                                                                     2,000
                                                                                                                               10
    -
               31 Dec      30 Jun       31 Dec          30 Jun          31 Dec          30 Jun    30-Sep-16                                                                                                                  -
                2013        2014         2014            2015            2015            2016                                  (10)                                                                                                  1Q15    2Q15      3Q15        4Q15     1Q16     2Q16      3Q16

                                                                                                                                       1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
                  Equity            Fixed Income                 Commodities                      Other                       (30)                                                                                                  EMEA                   Americas                    APAC

                                                                                                                              Equity              Fixed Income              Commodities                 Other

              Second consecutive quarter of decreasing                                                                        Drop in Market Velocity demonstrates the                                                     Combined with lower VIX this impacts
              on-exchange ETP Value Traded                                                                                    continuing slowdown through 2016                                                             margins, despite short term Brexit event

    € bn                                                                                                                                                                                                             %
                                                                                                                        3.1
                                                                                                                                                                                                                     60
       7,000
                                                5,974                            6,065                                  2.9
    6,000                                                        5,317                                                                                                                                               50
                   5,109        4,901                                                            5,053                  2.7
                                                                                                                4,708
       5,000                                                                                                            2.5                                                                                          40
    4,000                                                                                                               2.3
                                                                                                                                                                                                                     30
       3,000                                                                                                            2.1
                                                                                                                                                                                                                     20
    2,000                                                                                                               1.9

       1,000                                                                                                            1.7                                                                                          10

          -                                                                                                             1.5
                                                                                                                                                                                                                      0
                    1Q15        2Q15            3Q15             4Q15            1Q16            2Q16           3Q16                  1Q15        2Q15     3Q15         4Q15         1Q16        2Q16         3Q16
                                                                                                                                                                                                                             1Q14    2Q14   3Q14    4Q14    1Q15     2Q15    3Q15   4Q15     1Q16   2Q16     3Q16
                                                                                                                                                                                                                                     Quarterly Intraday High                        Quarterly Intraday Low
                                                                                                                                                                                                                                     Quarterly Average close level

* Source: Blackrock, Flow Traders, Bloomberg                                                                                                                                                                                                         Flow Traders | Investor Presentation                           9
  Market Velocity is the Market ETP Value Traded divided by the Market ETP Assets under Management
Resilient performance in a challenging environment

    KPIs Flow Traders                                                                                                                                                 Flow Traders NTI (in €m)
                                                                                                                     YTD               YTD
 In €bn unless otherwise stated                                   3Q16             2Q16               ∆          Sept16            Sept15     ∆               350.0
 Market ETP Value Traded                                          4,708            5,053            (7%)         15,826            15,984  (1%)                                                   304.7
 Europe                                                             216              241           (10%)            723               735  (2%)               300.0
 Americas                                                         4,103            4,333            (5%)         13,693            13,280    3%                                                64.5
 APAC                                                               390              479           (19%)          1,410             1,969 (28%)               250.0

 Flow Traders ETP Value Traded                                        149              141            5%               441               462          (5%)    200.0                            92.8                 181.3
 Europe                                                                98               94            4%               289               292          (1%)                  172.7
 Americas                                                              45               39           13%               129               125            3%    150.0                                               48.8
 APAC                                                                   6                8         (19%)                23                45         (50%)                 73.2
                                                                                                                                                                                                  70.5
 Flow Traders NTI (€m)                                              48.8             67.9          (28%)            181.3            240.2           (25%)    100.0                                                 67.9
                                                                                                                                                                            38.1
 Europe                                                             29.6             43.6          (32%)            113.1            149.1           (24%)
                                                                                                                                                               50.0        24.9
 Americas                                                           14.6             19.9          (26%)             50.5             38.4             32%                                        76.9              64.6
 APAC                                                                4.6              4.4             3%             17.7             52.7           (66%)                 36.5
                                                                                                                                                                 -
                                                                                                                                                                          2014                2015             2016 YTD
 Flow Traders RevCap (bps)                                            3.3              4.8           (1.5)              4.1              5.2          (1.1)
 Europe                                                               3.0              4.6           (1.6)              3.9              5.1          (1.2)
                                                                                                                                                                                    1Q       2Q           3Q   4Q
 Americas                                                             3.3              5.0           (1.8)              3.9              3.1           0.9
 APAC                                                                 7.5              5.9            1.6               7.8             11.7          (3.9)

   External Developments                                                                                                          Flow Traders’ Performance

     3Q16 was dominated by the Brexit aftermath, Central Bank decisions across the                                                   ETP Value Traded improved 5% compared to the previous quarter whilst the market ETP
     globe and the upcoming US elections and Italian referendum                                                                      Value Traded declined 7% over the same comparative period

     Market circumstances kept investors side-lined as volatility declined further to                                                NTI declined 28% q-o-q due to tightening market spreads, following lower market
     levels last seen in summer 2014                                                                                                 volumes as investors were assessing impact Brexit and the upcoming US elections and
                                                                                                                                     Italian referendum
     Product mix traded in the market remains skewed towards highly liquid products, as                                              Revenue Capture reached 3.3 bps as lower volatility affected market spreads and product
     flagged in previous quarters                                                                                                    mix, especially in Europe

  Note 1: Market Value Traded is restated based on Flow Traders Market reference data.
  Note 2: Flow Traders Value Traded is restated to correct for creations and redemptions, NTI is not impacted. Refer to appendix for more details.
                                                                                                                                                                                         Flow Traders | Investor Presentation 10
Maintaining cost discipline to preserve operating margins
   Impact of decline in Net Trading Income compensated by reduction in variable component of operating
   expenses
                                                                                                          3Q               2Q 3Q16 vs                 YTD       YTD Adj.          YTD      YTD16 vs
Consolidated (in €m)                                                                                   2016              2016      2Q16           Sep 16          Sep 15      Sep 15     adj. YTD-15
Net Trading Income                                                                                     48.8              67.9      (28%)           181.3          240.2        240.2           (25%)
Employee expenses (fixed)                                                                               (6.8)            (6.6)                     (19.4)          (15.1)      (15.1)           29%
Employee expenses (variable)                                                                            (9.8)           (17.3)                     (42.4)          (72.2)     (105.4)          (41%)
Technology expenses                                                                                     (8.3)            (8.6)                     (25.4)          (19.5)      (19.5)           30%
Other expenses                                                                                          (3.5)            (2.4)                       (8.5)          (7.9)        (9.8)            7%
Operational Expenses                                                                                  (28.4)            (35.0)     (19%)           (95.7)        (114.8)      (149.8)          (17%)
EBITDA                                                                                                 20.5              32.9      (38%)            85.6          125.4         90.4           (32%)
Depreciation / Amortisation                                                                             (1.5)            (1.5)                       (4.7)          (5.0)        (5.0)
Write offs tangible assets                                                                              (0.1)            (0.5)                       (2.7)          (0.0)        (0.0)
Result subsidiaries                                                                                     (0.0)             0.0                         0.0            -           -
Profit Before Tax                                                                                      18.9              30.9      (39%)            78.2          120.5         85.4           (35%)
Tax                                                                                                     (3.8)            (2.2)                     (11.3)          (21.9)      (17.9)
Net Profit                                                                                             15.0              28.7      (48%)            66.9           98.5         67.5           (32%)
EPS (in €)                                                                                             0.32              0.62                       1.44           2.12         1.45
EBITDA margin (in %)                                                                                    42%               48%                        47%            52%          38%

   Flow Traders EBITDA

      Increase in fixed employee expenses in line with expectation and driven by recruitment in September, increase in headcount
      Technological developments continued to improve performance, with a special focus on the US and Asian offices
      Technology expenses declined marginally versus 2Q due to mainly lower connectivity costs
      Variable employee expenses reduced on the back of profit for the quarter
      Other expenses grew, containing cost items like housing, fixed exchange costs. Housing showed a peak following increase in headcount in September
      Flow Traders is on track to realize second best year to date

                                                                                                                                                            Flow Traders | Investor Presentation 11
Preserved balance sheet strength
 Capital management resulted in stable trading capital, despite payment of interim dividend

   Condensed consolidated Financial Position                                                                      Development of regulatory capital

   Condensed Balance Sheet (In €m)                                     ∆ 30 Sept 16                        400
   Assets                                       30 Sep 16 31 Dec 15    vs. 31 Dec 15                                                                      340.0
                                                                                                            350
   Trading Capital                                     300      340            (40)                                                                                         298.9              300.0
                                                                                                                                       280.3
                                                                                                            300
   Property, Equipment and IntangibleAssets            22        24              (2)
   Other Assets                                        24        19              5                          250                                       268.0
                                                                                                                      204.3
                                                                                                                                                                         252.2
   Total Assets                                        346      383            (37)                                                                                                         240.2
                                                                                                            200                      217.1
                                                                                                            150    180.5
   Equity &Liabilities
                                                                                                            100                                                                  136.7               132.7
                                                                                                                                             123.5
   Other Liabilities                                   98       122            (23)
                                                                                                                           84.3                                94.0
   Tax Liabilities                                      7        14              (7)                         50
   Total Liabilities                                   105      136            (31)                           0
                                                                                                                    31 Dec 2014      30 Jun 2015       31 Dec 2015        30 Jun 2016         30-Sep-16

   Total Equity                                        240      247              (6)                                  Regulatory Capital           Regulatory Capital Required           Total Trading Capital

  Trading Capital & Dividend

   Trading capital at the end of 3Q was €300m, reflecting a stable position versus the previous quarter
   Interim dividend payment of € 0.55 per share in September 2016
   Regulatory Required Capital remained stable at € 132.7m from € 136.7m end 2Q16
   Our list of Prime Brokers continued to grow in 3Q
   Focus continues to be on maximizing profitability and returns to shareholders and remaining committed to paying at least 50% of our Net Profit in dividends

                                                                                                                                                             Flow Traders | Investor Presentation 12
Long term historic growth trend continuous
Despite varying levels of volatility through the years, Flow Traders NTI growth trend has consistently outperformed
the market AuM growth trend
    Flow Traders’ NTI (in €m), Market’s AUM ($Bn) and VIX annual average (%) since 2010

   NTI (€m)                                                                                                                            AUM ($bn)
                          NTI
     350
                          AUM                                                                                         3,262             350.0
                                                                                                                                        3,500
                                                                                                                305
     300                                                                                              2,904                              3,000
                                                                                                                                        300.0
                                                                                     2,640
     250                                                                                                                                250.0
                                                                                                                                         2,500
                                                                      2,262
                                                                                                173
     200                                            1,838                                                                      181      200.0
                                                                                                                                         2,000
                                1,435                                          143
      150     1,390                                                                                                                     150.0
                                                                                                                                         1,500
                                            105
      100                                                       91                                                                      100.0
                                                                                                                                         1,000
                         48
       50                                                                                                                               50.0
                                                                                                                                         500

        0                                                                                                                               0.00
                  2010               2011                2012               2013         2014                2015        9M 2016
  VIX (%)
                                                                Stable growth with upside potential
       35                                                          in periods of higher volatility

       25

       15

        5
         2010     2010        2011   2011         2012   2012        2013   2013     2014 2014        2015    2015    20169M 2016
                                                                                                                              Flow Traders | Investor Presentation 13
Recognition of our expertise and market leading position

 Nine consecutive              Four times winner
 years running                 ETF MARKET
 ETF MARKET                    MAKER
 MAKER Europe                  Asia-Pacific
 2007 | 2008 | 2009 | 2010 |   2011 | 2012 | 2013 | 2015
 2011 | 2012 | 2013 | 2014 |
 2015

 Four consecutive              Three times winner
 years running                 ETF RISK
 ETF EXPRESS                   Best Trading
 Award Winner                  House
 2013 | 2014 | 2015 | 2016     2013 | 2014 | 2015

                                                           Flow Traders | Investor Presentation 14
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